Addus HomeCare is making a major move to expand its business with plans to buy Gentiva's personal care business for $350 million.
Based in Atlanta, Gentiva provides hospice, palliative and personal care services, with more than 590 locations and thousands of clinicians and caregivers across 38 states. Through its personal care services, Gentiva serves 16,000 patients per day in a seven-state service area of Arizona, Arkansas, California, Missouri, North Carolina, Tennessee and Texas.
Frisco, Texas-based Addus expects to close the transaction following completion of regulatory approvals and subject to customary closing conditions. The company will fund the acquisition through its existing revolving credit facility.
The acquisition deal will extend Addus' personal care market coverage in seven states, including Texas and Missouri, which are new markets for the company.
Gentiva is the largest provider of personal care services in Texas, where Addus currently does not provide personal care operations, according to Dirk Allison, chairman and CEO of Addus.
"We believe this acquisition is a great strategic fit for Addus," Allison said. "This acquisition fits squarely into our growth strategy to leverage our strong personal care experience to build scale in existing markets as well as enter select new markets where we can immediately establish a significant presence."
Gentiva's personal care operations have annualized revenues of approximately $280 million, Allison noted.
"We expect this transaction to be accretive to our financial results. Importantly, after funding this acquisition, Addus will still maintain a leverage ratio of less than three times, with the ability to quickly reduce our leverage through the additional expected cash flow," he said in a statement.
Addus is a provider of home care services that primarily include personal care services that assist with activities of daily living as well as hospice and home health services. The company currently provides home care services to more than 49,000 consumers through 214 locations across 22 states.
Acquisitions continue to be an important part of Addus' growth strategy, Allison said.
"We will continue to pursue strategic acquisitions that meet our criteria and are accretive to our operations. Fortunately, our strong capital structure supports our strategy, and we look forward to additional opportunities ahead for Addus," he noted.
David Causby, Gentiva's CEO, said Addus is the "right home" for the company's personal care division. "This will ensure continued growth for that segment under proven leadership and will allow us to sharpen our focus on our industry-leading core hospice and palliative businesses, where we have the greatest opportunity to deliver the compassionate care that defines who we are, to those who need us the most.”
Last month, Addus announced plans to sell its New York personal care business, along with its fiscal intermediary services for the state’s consumer-directed care program. The company will offload its New York operations to HCS-Girling, another home-based care provider.
The home care market has seen a lot of M&A activity. In March, Advocate Health sold off its senior home care business Senior Helpers to private equity firm Waud Capital Partners for an undisclosed sum. Senior Helpers, based in Maryland, is among the space’s largest players with over 380 franchised and owned locations across 44 states, Canada and Australia.
A year ago, UnitedHealth Group made waves when it announced plans to acquire home health provider Amedisys for $3.3 billion, outbidding a competitor, Option Care Health. However, the Department of Justice and Oregon regulators are taking a closer look at the potential deal.
BofA Securities served as a financial adviser, and Bass, Berry & Sims PLC served as legal counsel to Addus in the transaction. Goldman Sachs & Co. served as financial adviser, and Debevoise & Plimpton LLP and Ropes & Gray LLP provided legal counsel to Gentiva.